2013 (4) TMI 252 - SC - Companies Law

Supreme Court overturns High Court judgment, remands for fresh consideration.

Bhagwati Developers Private Ltd. Versus The Peerless General Finance Investment Company Limited & Ors.

Bhagwati Developers Private Ltd. Versus The Peerless General Finance Investment Company Limited & Ors. - 2013 AIR 1690, 2013 (5) SCR 708, 2013 (5) SCC ... Issues Involved:1. Maintainability of the Company Petition under Sections 397 and 398 of the Companies Act, 1956.2. Validity of the consent given by shareholders for filing the Company Petition.3. Effect of withdrawal of appeals by original petitioners on the maintainability of the Company Petition.4. Locus standi of the appellant to challenge the dismissal of the Company Petition.5. Interpretation of the Supreme Court's order dated 26.04.1996.Detailed Analysis:1. Maintainability of the Company Petition under Sections 397 and 398 of the Companies Act, 1956:The right to apply for the winding up of a company is available under Sections 397, 398, and 399 of the Act 1956, provided the applicant holds 10% of the total shareholding. The petition can be filed with the consent of other shareholders to meet this requirement. The application is maintainable if the company's affairs are conducted in a prejudicial or oppressive manner. The Supreme Court in previous cases (e.g., M.S.D.C. Radharamanan v. M.S.D. Chandrasekara Raja) has upheld this principle.2. Validity of the consent given by shareholders for filing the Company Petition:The Court examined whether the petitioners had the requisite 10% shareholding at the time of filing the Company Petition. It was held that the consent of shareholders can be given by a Power of Attorney holder and does not necessarily need to be in writing or annexed with the petition. The validity of the petition must be judged based on the facts at the time of its presentation, as established in Rajahmundry Electric Supply Corporation Ltd. v. The State of Andhra.3. Effect of withdrawal of appeals by original petitioners on the maintainability of the Company Petition:The withdrawal of appeals by the original petitioners (Chatterjee brothers) led to the dismissal of the Company Petition. However, the Supreme Court held that a petition filed in a representative capacity does not become non-existent or non-maintainable due to the withdrawal by original petitioners. The other consenting shareholders are entitled to be transposed as petitioners, and the court can decide the petition on merits even if the original petitioner withdraws.4. Locus standi of the appellant to challenge the dismissal of the Company Petition:The appellant argued that the High Court erred in dismissing the appeals based on locus standi and limitation, contrary to the Supreme Court's order dated 26.04.1996, which allowed the appellant to file independent appeals without these objections. The High Court's reliance on previous orders dismissing the appeals was incorrect as it rendered the Supreme Court's order a nullity.5. Interpretation of the Supreme Court's order dated 26.04.1996:The Supreme Court's order allowed the appellant to file independent appeals against the dismissal of the Company Petition, with no objections on limitation or locus standi. The High Court failed to consider this order and incorrectly relied on its previous judgments. The Supreme Court clarified that the High Court should have adhered to its order and decided the case on merits, ignoring the earlier judgments.Conclusion:The Supreme Court allowed the appeals, set aside the High Court's judgment dated 24.11.2003, and remanded the matter for fresh consideration. The High Court was instructed to decide the appeals expeditiously, adhering to the Supreme Court's order dated 26.04.1996, and disregarding its earlier judgments. The decision emphasized the principles of representative capacity in company petitions and the necessity of adhering to higher court orders.